Insight Finding Investment Opportunities in the Modern Zoning Code
By Landon Brown,
The Boise City Council unanimously approved a new zoning code, known as the Modern Zoning Code (MZC), that will go into effect on December 1, 2023. The MZC significantly changes zoning classifications with a focus on increasing density, particularly along major transit corridors and in residential neighborhoods, and increasing mixed use areas. Two significant changes in the MZC may provide opportunities for residential real estate investors and developers to obtain stronger financial gains in areas that were historically limited.
Density Bonuses for Triplexes and Fourplexes
Historically, triplexes and fourplexes were only allowed in 3 of the 7 residential zones (and conditionally permitted in the other 4 residential zones). Now, the MZC allows triplexes and fourplexes in all residential zones, subject to certain requirements. Specifically, the MZC offers a density bonus for triplexes and fourplexes that incorporate affordability and sustainability requirements.1 The density bonus allows a developer to exceed the density limits in a residential zone. For example, the R-1A zone allows a density of 2.1 units per acre and a minimum lot area of 20,000 sf (a little less than ½ acre). This means a ½ acre parcel can potentially hold 2 dwelling units. However, if the bonus density is achieved, a developer can exceed the density requirements and place 4 dwelling units on the ½ acre parcel. This permits a developer to construct a triplex or fourplex in areas throughout the city where such use was previously not allowed. To be eligible for the density bonus, a developer needs to meet either the affordability or sustainability requirements as follows:
| Affordability Requirements | Sustainability Requirements |
|---|---|
| Triplexes for rent One unit must be income-restricted for a period of 20 years to households earning not more than 80 percent of the Area Median Income for the Boise Area. | Clean Energy The building must use electricity or geothermal energy to meet all of its heating, hot water, and appliance energy needs for all dwelling units. |
| Fourplexes for rent Two units must be income-restricted for a period of 20 years to households earning not more than 80 percent of the Area Median Income for the Boise Area. | Energy Conservation The building shall either: (a) Consume at least 15 percent less electrical energy than would be consumed if the building met the adopted energy code, based on modeled building energy performance comparison, individually documented energy savings measures, or receiving a comparable energy efficiency utility incentive (if applicable/available at the time of construction); or (b) Must meet the adopted City of Boise Green Building Code, whichever achieves the greater energy savings. |
| Triplexes for sale One unit must be affordable to households earning no more than 120 percent of the Area Median Income and contain this requirement as a deed restriction for 20 years. | Water Conservation The building shall consume at least 15 percent less water than would be consumed if the building met all water conservation standards applicable to similar developments. |
| Fourplexes for sale Two units must be affordable to households earning no more than 120 percent of the Area Median Income and contain this requirement as a deed restriction for 20 years. |
If a developer meets either the affordability or sustainability requirements, the developer is entitled to a density bonus allowing construction of a triplex or duplex in zones that historically required conditional use permits. The MZC provides these incentives in an attempt to increase the supply of diverse, affordable, and sustainable housing in Boise. These incentives may provide opportunities for developers to flip single family dwellings into triplexes or fourplexes without the need to go through time-consuming and expensive conditional use permit hearings.
Consistent with these incentives, the MZC allows a developer utilizing the density bonus to perform a Minor Land Division without the need to go through the subdivision plat process.2 So, if a developer eligible for the density bonus prefers to construct four detached dwelling units rather than a fourplex, the developer can submit a Minor Land Division application, which only requires an approved Record of Survey. This eliminates the requirements of obtaining expensive subdivision plats and meeting the subdivision design standards. The Minor Land Division does need to meet the requirements set forth in MZC section 11-04-04.3.B, but these standards are far less burdensome than the subdivision standards.
With the newly created density bonus, a developer may discover investment opportunities in the construction of triplexes or fourplexes in residential zones that historically have not allowed such uses.
Removing Owner-Occupied Requirements for ADUs
Accessory Dwelling Units (ADUs) are dwelling units containing a kitchen, full bathroom, and living and sleeping areas (which may be combined) that are incidental and subordinate to the principal use of the premises and are located on the same lot or parcel as the principal dwelling unit.3 Most ADUs are commonly known as mother-in-law suites, or are garages, shops, or attics converted into single-unit apartments or Airbnbs. Boise’s previous zoning code permitted ADUs so long as an owner occupied the primary dwelling unit. In other words, the owner of the parcel or lot was required to reside in the primary house, and then the owner could rent the ADU to the public for an additional income stream.
Now, the MZC removes the requirement that the primary home be occupied by the owner. This means that an investor can purchase a property with an ADU and rent out the primary home as one income stream and rent the ADU as a second income stream. This adds an additional source of income that was not previously possible.
Further, the MZC increases the allowed size of an ADU from 700 feet to 900 feet, allows the ADU to have two bedrooms, and removed any parking requirements for the ADU. With these changes, it is easy to see how ADUs could become strong investment opportunities.
As with any zoning code modification, it will take time and practice to fully digest and comprehend the investment advantages that may arise through significant zoning changes. Investors and developers need to have a strong understanding of the MZC to fully realize the benefits available under the new code. Attorneys at Hawley Troxell are experienced in interpreting, applying, and using zoning codes to help investors and developers reach their maximum investment opportunities. Contact our attorneys today to maximize your real estate investments.
References:
1 MCZ § 11-04-03.7.D.
2 MZC § 11-04-04.3.B.
3 MZC § 11-06-03.
This blog is provided by Hawley Troxell Ennis & Hawley LLP for educational and information purposes only. It is intended to notify our clients and friends of certain events or issues. It is not intended to be, nor should it be, used as a substitute for legal advice regarding specific factual circumstances. © Hawley Troxell Ennis & Hawley LLP all rights reserved.
